Momentum investing revolves around the idea of following a stock's recent trend in either direction. In the 'long' context, investors will be essentially be "buying high, but hoping to sell even higher." With this methodology, taking advantage of trends in a stock's price is key; once a stock establishes a course, it is more than likely to continue moving that way. The goal is that once a stock heads down a fixed path, it will lead to timely and profitable trades.
While many investors like to look for momentum in stocks, this can be very tough to define. There is a lot of debate surrounding which metrics are the best to focus on and which are poor quality indicators of future performance. The Zacks Momentum Style Score, part of the Zacks Style Scores, helps address this issue for us.
Below, we take a look at Skyward Specialty Insurance (SKWD), a company that currently holds a Momentum Style Score of B. We also talk about price change and earnings estimate revisions, two of the main aspects of the Momentum Style Score.
It's also important to note that Style Scores work as a complement to the Zacks Rank, our stock rating system that has an impressive track record of outperformance. Skyward Specialty Insurance currently has a Zacks Rank of #2 (Buy). Our research shows that stocks rated Zacks Rank #1 (Strong Buy) and #2 (Buy) and Style Scores of A or B outperform the market over the following one-month period.
You can see the current list of Zacks #1 Rank Stocks here >>>
Set to Beat the Market?
Let's discuss some of the components of the Momentum Style Score for SKWD that show why this property and casualty insurance holding company shows promise as a solid momentum pick.
A good momentum benchmark for a stock is to look at its short-term price activity, as this can reflect both current interest and if buyers or sellers currently have the upper hand. It's also helpful to compare a security to its industry; this can show investors the best companies in a particular area.
For SKWD, shares are up 12.62% over the past week while the Zacks Insurance - Property and Casualty industry is up 3.18% over the same time period. Shares are looking quite well from a longer time frame too, as the monthly price change of 23.72% compares favorably with the industry's 10.76% performance as well.
While any stock can see a spike in price, it takes a real winner to consistently outperform the market. Over the past quarter, shares of Skyward Specialty Insurance have risen 21.59%, and are up 57.87% in the last year. In comparison, the S&P 500 has only moved -6.46% and 11.69%, respectively.
Investors should also take note of SKWD's average 20-day trading volume. Volume is a useful item in many ways, and the 20-day average establishes a good price-to-volume baseline; a rising stock with above average volume is generally a bullish sign, whereas a declining stock on above average volume is typically bearish. Right now, SKWD is averaging 406,812 shares for the last 20 days.
Earnings Outlook
The Zacks Momentum Style Score encompasses many things, including estimate revisions and a stock's price movement. Investors should note that earnings estimates are also significant to the Zacks Rank, and a nice path here can be promising. We have recently been noticing this with SKWD.
Over the past two months, 4 earnings estimates moved higher compared to 1 lower for the full year. These revisions helped boost SKWD's consensus estimate, increasing from $3.45 to $3.50 in the past 60 days. Looking at the next fiscal year, 4 estimates have moved upwards while there have been 1 downward revision in the same time period.
Bottom Line
Given these factors, it shouldn't be surprising that SKWD is a #2 (Buy) stock and boasts a Momentum Score of B. If you're looking for a fresh pick that's set to soar in the near-term, make sure to keep Skyward Specialty Insurance on your short list.
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Skyward Specialty Insurance Group, Inc. (SKWD): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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